Media  Foreign Affairs and National Security  2018.12.04

The Protestant ethic and Carlos Ghosn

the japan times on November 27, 2018

Carlos Ghosn is gone! His departure from the chairmanship of Nissan and Mitsubishi Motors, however, is still rocking Tokyo. Throughout the past week, Japan's mainstream media carried, day and night, stories about the poor Lebanese-Brazilian-French corporate executive, who in 2002 was awarded Asia's Businessman of the Year by Fortune magazine.

For many in Tokyo the news was a shock but not a surprise. Yes, when he first came to Tokyo in 1999, Ghosn surprised ordinary Japanese by revolutionizing the way Nissan did its business as well as by making several million dollars a year -- far more than the average executive pay at big Japanese corporations.

However, we do not consider the huge amount of money Ghosn makes as outrageous anymore. What was shocking to us is the amount of money -- approximately ¥5 billion -- that he allegedly underreported since 2014. Ghosn also reportedly used corporate money to buy residences in the Netherlands and three other countries.

Ghosn was also criticized for allegedly having Nissan pay $100,000 a year to his sister for advisory services that she never provided, and fund his family's private trips and dining. We were shocked because a great businessman like Ghosn did not keep his private considerations separate from his public life -- not by the size of his annual income.

I was appalled, therefore, by the stereotypical views of some Western pundits in Tokyo and abroad, such as that "Nissan's closed Japan Inc. elements carried out a coup against their skillful but 'gaijin' chairman. No talented foreign executives will come to Tokyo." Those ignorant observers fail to comprehend what really happened.

The memories of those pundits, like those of U.S. President Donald Trump, are those of the 1980s, when many people thought that "xenophobic" Japan Inc. would not accept anything alien to the culture and the traditions of the indigenous society, which is so closed that the foreigners in Japan are unfairly discriminated against. But they are wrong.

I also doubt media reports in Tokyo that the bad guys were Renault and Ghosn while Nissan was a victim. Ghosn had desperately tried in recent years to bridge the gap and sought an equal alliance between Renault and Nissan, ironically, under his dictatorial governance. Poor Ghosn, trapped in quandary, had to pay a debt of his own.

This entire episode reminds me of the great book written in 1904-05 by Max Weber, a German sociologist. Weber wrote that the capitalism evolved when the Protestant ethic -- hard work combined with an ascetic life and saving for the future -- influenced traders, merchants, investors and workers in secular Europe.

When I first read Weber's book, "The Protestant Ethic and the Spirit of Capitalism," in 1974, I was almost convinced that the only non-European nations which could embody and substantiate the spirit of capitalism that Weber described, must be the United States and Japan. The U.S. is understandable but why Japan? I will give you the reasons.

Weber wrote that Puritan ethics and ideas influenced the development of capitalism, and that the "spirit of capitalism" is not in a metaphysical sense but is rather a set of values: the "spirit of hard work and progress." Although Japan has no Protestant traditions, it has cultivated similar ascetic work ethics since the 17th century.

The following is my take on Ghosn's rise and fall:

1. It was not a coup d'etat by Japan, Inc. against a foreign executive. It was a simple business decision. Renault sent Ghosn to help Nissan 20 years ago. Nissan became strong again and now pays huge dividends to Renault. Renault's plan to take over Nissan through Ghosn, who finally accepted the idea, was unanimously rejected by Nissan's board members, including two foreigners. Period.

2. Ghosn could not win the hearts and minds of Japanese employees. The Japan Times on Sunday carried an analysis titled "Is greed good? Ghosn and CEO pay." The article quoted a Waseda University professor of commerce stating, "Ghosn's first clash with Japan's unique view on compensation and corporate life began not long after his arrival," and "if he took more salary, he would have received more criticism, which is certainly one motivation for covering up his real compensation."

Make no mistakes. Of course, greed is good in Japan, so long as the executives embody the Protestant ethic values of hard work, an ascetic life, saving for the future and service to the community. What was revealed so far about Ghosn's public and private life irritated many of Nissan's Japanese employees.

In other words, if Renault really wanted to take over Nissan, they should have sent the right person for that job, someone who could win the hearts and minds of Nissan's labor force -- mostly Japanese employees. If Renault had done that, there would have been no "coup d'etat" against the chairman they sent to Nissan.

3. Carlos Ghosn was a successful but disrespected businessman.

Ghosn, as "Le Cost Killer" or "Mr. Fix It," could cut costs by measures such as laying off many employees or by introducing new lean-production systems. His dictatorial style of decision-making, though very successful at the beginning, seems to have eventually alienated his Japanese subordinates.

If Ghosn had practiced the Japanese version of "noblesse oblige," which means, according to Merriam-Webster, "the obligation of anyone who is in a better position than others -- due, for example, to high office or celebrity -- to act respectably and responsibly," he could have stayed in Japan longer.

4. Japan will still have to continue to change.

I am always in favor of the transformation of business cultures in Japan. For Japan to survive the rapidly changing international or domestic business environment, it must continue to always review old traditions and to adapt to new and better styles of doing business.

Having said all the above, I hope Japan will continue to uphold the work ethic that it has cultivated for centuries. If we lose the spirit of hard work with an ascetic life, saving for the future and service to the community, we would just be greedy people, like Ghosn.